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January 27, 2010

A Lost Generation of Entrepreneurs?

I've been worrying lately that we are suffering from a lost generation of entrepreneurs.

That was my first reaction when I read what Sequoia's Doug Leone said a few weeks ago about innovation and age at a recent talk with MIT Sloan students visiting Silicon Valley, where Leone claimed that only people under the age of 30 are truly innovative.  Over 30 folks can manage innovation, Leone observed, but you need to be under 30 to create it.  Examples cited included Jack Dorsey, Twitter's founder who was 30 at the time that he started the service.

Now you can argue whether this is right or whether it's a hyperbolic statement for effect, but let's put that aside for now.  Here's my worry:  when I was under 30, I had the opportunity to be a part of a rocket ship start-up (Open Market), that promoted me into an executive team position of a public company in my 20s.  The lessons and skills from that experience inspired me to delude myself into thinking I could be the founding president of another start-up, Upromise, when I was 30.  At the time, when I looked around at my peers and friends, they were all doing the same thing at a similar age.  Folks like Jeff Glass, who started m-Qube at around the same time and age, Scott Friend, who became president of ProfitLogic, Russ Wilcox at e-Ink and many more). These companies all eventually became substantial companies that each resulted in exits north of $100 million.

Now fast-forward to today.  During the period of 2001-2009, there have been very few substantial start-ups built to allow that generation's 20-somethings to learn and develop company-building skills.  As a result, we have a lost generation of entrepreneurs. Not enough 20-somethings, or let's even say under 35, have had the opportunity to see success at a young age and learn the important lessons of start-up leadership.  I think once you've seen some success in your 20s, you are that much more likely to be a strong entrepreneurial advocate, mentor and serial starter in your 30s.

When my partners and I tried to develop a list of today's under 35 entrepreneurs who had started companies and seen meaningful success with them, it was a depressingly short list.  In addition to Twitter's Jack Dorsey, Mark Zuckerburg is an obvious one, as are the YouTube founders, Chad Hurley and Steve Chen.  Less well-known standouts include the Great Point Energy team (Andrew Pearlman and Avi Goldberg), who saw some success at Coatue (sold to AMD) which led them to starting what looks to be a fascinating and potentially game-changing clean energy company.  And there's Ric Fulop, who co-founded A123 in his late 20s, last year's IPO darling.

So what do we do about it?  I suppose one thing we can do is celebrate the heck out of the under 35 entrepreneurs we know who have seen success because we need their peers to know that it's possible and encourage them to serve as role models to today's students so that we don't suffer from yet another lost generation in the years ahead.  So who else should be on our list?


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Leone's statement is, of course, complete BS. (of course, I
am an over-40 entrepreneur so I would think that. 8))

The explosion in the number of companies (and associated jobs) that occurred during the bubble provided "excess inventory" of executive jobs that allowed many people to take on executive roles, that historically would have been "too young" to do so. But that world is no more - it's much harder to start a meaningful company, and takes much longer to get to success, than in 1998 - there's just less money sloshing around the system. I'd argue it's more that there are simply fewer leadership positions around, and companies take much longer to exit, that explains the lower rate of younger entrepreneurs in executive positions.

Also, New England's bias towards enterprise / B2B companies may explain it - running an enterprise software company requires a different skillset than an consumer web company (and I would argue requires a bit more experience to manage well).

(and of course many of those younger entrepreneurs have gone to California or New York, where it's not hard to companies with young leadership).

Throwing in Greg Selkoe of Boston's own Karmaloop, and Rob Kalin of NY's etsy. These companies are still very much in growth mode so hard to say if they will hit pantheon status. But they meet your criteria of young innovators with meaningful traction doing some pretty disruptive things.

I think the age thing is a silly conversation, BTW. Being innovative is more about mindset and thought processes. I like Roger Martin's analysis of this in his book "The Opposable Mind" for the best insight I have seen on innovation.

As I recall Dr. Edgar Codd, a great innovator invented the concept behind what is now called the relational database in a paper entitled "A Relational Model of Data for Large Shared Data Banks" when he was in his 50's. Not bad.

OK we should officially rename Jeff's blog to "Old folks support group" 8)

Jeff - I agree with your factual observation but not quite the assumption it is hinged on. I don't think innovation can only happen under 20. I think economic factors make it easier for more people to engage in risk taking without worrying about the future at that age. Therefore the probability of a few of them succeeding is much higher simply because the pool size is much bigger than say in your 30s and 40s when most people barring a few crazies like me worry about kid's college, retirement etc.

Your conclusion however is somewhat valid because if people have'nt been part of high growth startups early on and gained the confidence and experience, the probability of them engaging in first or repeated startup ventures in their 30s and 40s is comparatively much lower than the 20s group for economic and psychological reasons.

Thanks, Jules. I think the age comment is thought-provoking but, yes, a bit silly as a gross generality. Mindset is the right focus.

Good points, Mark. We could use a bit more slosh to train the next generation!

indeed. and send some my way too 8)

Ayikudy--Great point. Glad you brought it up.

Caterina Fake once told me she only invests in teams that don't take any salary (for years) and I said "You'd be either funding millionaires (alas, probably not hungry ones) or inexperienced young teams, by definition. Why be so restrictive?"

But that was what she did at Flickr and it gives her comfort around the issue of commitment.

Seems to me it takes more commitment to do this when the costs and risks to your family are very real.

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Great entrepreneurs come in all ages, shapes
and sizes, that is for sure!  To be clear, I wasn’t arguing that only the young
are innovative.  I was merely observing that this generation’s young entrepreneurs
have fewer successful peers to serve as role models due to the dearth of great companies
built in 2001-2009.


Oh, yeah....as they say in Ireland, "I lost the plot." I do appreciate your broader point and it's a good one.

Jeff, Great post. One that's very much in line with Gladwell's book, Outliers. Time and era have a lot to do with successful individuals and business innovation. A 33 year old today graduated college in 1999, which provided just about a year until the bubble burst and since then their professional careers have seen as much in recessionary periods as it has in growth periods. Someone who had graduated a mere 5-7 years earlier, in 1992-1994, faced a very different first few years of formative training. Many of those folks "learned" during the bubble and became Founders, CEOs, and VPs by sheer luck (and a ridiculous abundance of capital). Given the "difficult" economic environment we've had, since basically 2000, the younger generation has had to worry more about getting paid and making student loan & rent payments than taking risk. Age & environment clearly have a lot to do with our risk-persuasion and innovation. Charlie

One more thought. I'm no Doug Leone, who clearly has an amazing track record to point to, so I can only respectfully disagree. But, my take on it is that building great companies is not only about innovation (just innovation might build a nice feature or cool patent, but that's it). Building lasting companies is about leadership, vision, management, and execution. Building lasting companies is about developing a infrastructure that is viable and sustainable. Building lasting companies is about creating an organization that can withstand adversity and face challenges over time.

We've given too much credit to the "flip" entrepreneurs who were bred from the easy days of cheap capital. At the end of the day, business is about revenues & profits. Business is about a viable business model that is self-sustainable.

After giving this post a lot of thought I feel like the entrepreneurial community seems to be forgetting about social entrepreneurship and a lot of 20-somethings are involved in those efforts. Quite a few of my former classmates either started their own companies or have joined entrepreneurial ventures with a double or sometimes triple-bottom lines. The hybrid model of non-profit/social venture has really taken off and communities have been created to support them. Whether it be microfinance or social venture funds or somewhere in between a lot of 20 somethings are involved and fully vested and these companies are also entrepreneurial and therefore should not be forgotten. From these ventures there will be success stories and serial entrepreneurs will be born- maybe without the exits of $100M. But does that make these ventures less entrepreneurial?

I agree with this article to an extent. I don’t believe its a lack of entrepreneurs as much as big organizations buying out failing organizations and running those failing organizations. Here is a case in point. AIG, Freddy Mac, and all these other big banks that were failing because of their poor decisions. If we let these companies die, it would create a large void for new innovative banks and institutions to fill in. These are companies right now that are right now as we speak trying to make it.

But even in this case when the big monster that buy and run failing businesses that found a void to fill, themselves fail, government props them up. This essentially halts innovation and entrepreneurship. We don’t have a void of entrepreneurs in my generation. We have a bunch of mammoths that wont die out because we as a government by the people, wont let them.

To further my point after 9/11 many airlines faced bankruptcy. Our government funded them to prevent them from failing. Why do we stop failure of poor to sloppy business practice as a nation? Would it have been tougher for all of us as Americans briefly? Yes, but our deficit wouldn’t be nearly as deep as it is now and we would probably have some excellent airline from these entrepreneurs the were never allowed the opertunity. To a point these airline would probably be running cheaper.

The right question is not ‘why are there no 30 something entrepreneurs?’ the right question is, ‘why don’t we let these old mammoths that cant adapt to new global conditions, die?’ For the sake of our future I ask everyone reading this to stop stopping failure.

Make no mistake, we are indeed here.

Quietly incubating, learning and aligning in the shadows, preparing to leap forward into the light. Sooner than you think...

- jetchicken

Jeff - Good post. Made me think what I can do to help young entrepreneurs. If you or anyone reading this blog like to refer me a 20 year old who is strong enough to take the challenges/risks we take, I am glad to help him/her to launch a great career. It's a tough 2 years for UnboundCommerce, but we survived and I know its going to be a very successful company.


I think that perhaps the "lost generation" may simply be a market cycle. The years after the .com bust and September 11 saw markets plummet and so students flocked to careers where they saw more job security. At many colleges, investment banking became the most popular career of choice because of its wild growth at the time. Now that Wall Street and big companies have showed more vulnerability, people are again taking more risks on startups.

As for the age issue, although I'm 22, I know a lot of people over 30 who I think are extremely innovative. I think the fact that ground-breaking companies are started by younger people more often may be more of a consequence of older people being reluctant to take wild risks that might put their family in jeopardy. Younger people don't have families, mortgages, etc, and so are more predisposed to high-risk/high-reward ventures.

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Great blog, and thanks for being so thought-provoking.

My experience has led me to conclude that entrepreneurs are a rare fluke of nature, and exogenous factors have little or no influence on their numbers. So I'm skeptical that external factors could lead to a "lost generation" of entrepreneurs.

At times, technology disruptions create an environment more favorable for entrepreneurs. And NASDAQ's peaks and valleys can greatly influence the financial outcomes for entrepreneurs, as well as provide such huge gains that some entrepreneurs opt to retire. But, when all is said and done, great entrepreneurs result more from nature, not nurture.

If history shows that the 2001-2010 period was in fact a decade of relatively few blockbuster start-ups, that will say a lot more about an over-funded industry with a generally-unattractive exit climate. But if there were any meaningful way to measure the number of great entrepreneurs in our midst, we'd find that the first decade of this century had a comparable number as previous decades, and this generation of entrepreneurs wasn't somehow "lost." Some may have called in rich after the bubble, others may have chosen to start non-profits, and still others may be working on initiatives whose success has yet to be visible. But they're out there.

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Agreed, Ted. Thanks for the great
comment.  I just hope we are doing a good job to train this next generation of entrepreneurs. 
BTW, did you see my Curt Schilling comes to HBS post at http://bit.ly/9JKMpM?

Thought-provoking, but fear not. We're not lost. By your calculus the "Lost" generation should be about mid thirties now and I'm there. I can speak for myself when I say that I pushed it to the very end and have become a statistic. The one that says mid-thirty entreps have to ratchet down the risks and do right by the family & the mortgage.

IMHO, this generation will lose all trust in banks and VCs, but we'll still build great companies - by bootstrapping. We might have to lay low to pay bills or spend more time in the garage building saleable soft/hard products, but thanks to nature (like Ted said), the bug is in us. We're not visible right now b/c the $ markets are not supporting us, but through tough times and even tougher choices, we're still learning those company-building skills.

A new crop of Angels & VCs can change the dynamic by cutting us term sheets more quickly... but watch this space, 'cause we'll find a way to make it - we just have to...

I would argue that the era you came of age in was the exception, not the norm! Instead of the “lost generation” you were in the “found generation.” The lost generation is what it is always like save for that outrageous five year window a decade ago.

Your post surely made some "age" issue here. I'm almost 40 but I don't mind, it's my slogan that matter's most. "Keep doing">>

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